In the first half of 2024, the chemical industry witnessed a remarkable phenomenon – the rise of pure benzene as a dark horse in the market. Amidst a slowdown in capacity expansion, the tightening supply has propelled pure benzene prices to oscillate at high levels, significantly influencing the concurrent rise of styrene. However, the price gap between the two has frequently hit historic lows.

Supply and Demand Dynamics The East China main port inventory of pure benzene has consistently remained below 100,000 tons, a relatively low level. Since late May, the inventory rapidly depleted from over 55,000 tons to 30,000 tons. The expectation of continued inventory reduction, coupled with limited replenishment and active market pickups, suggests a potential drop to historically low levels. Additionally, reduced operation rates due to multiple facility maintenance periods in Q2 further strengthened the market’s bullish sentiment. Despite some facilities resuming operations in June, the overall increase in domestic production was modest.

Downstream Demand After a significant drop in March, the comprehensive downstream operation rates rebounded in April and May. The robust demand has not alleviated the shortage of pure benzene spot supplies, thus providing strong upward momentum. As of June 17, the spot price for pure benzene in East China reached nearly 9,600 CNY/ton, an increase of 2,235 CNY/ton from the beginning of the year.

Styrene’s Performance The aromatics chain remained strong in the first half of 2024, with styrene industry operations maintaining mid-to-low levels. Port inventories have been low since Q2, especially with the strong support from upstream pure benzene, leading to a volatile rise in styrene prices. However, recent shifts in the EB main contract and valuation declines due to early pure benzene trade expectations have resulted in a weaker performance compared to pure benzene. As of June 17, the spot price for styrene in East China hovered around 9,500 CNY/ton, up 1,215 CNY/ton from the beginning of the year, a lesser increase than pure benzene.

Market Outlook With the return of maintenance facilities and the implementation of downstream maintenance plans in July, the overall supply and demand landscape for pure benzene is expected to relax, potentially easing the tight spot market and posing a risk of valuation pullback. In contrast, styrene, despite a slight weakening in supply and demand, is structurally stronger than upstream pure benzene. The high loss pressure may enhance its resistance to price drops, and the price gap between the two is anticipated to narrow.

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